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Strong results from JPMorgan Chase & Co (JPM.N) on Friday bolstered expectations for top U.S. banks, many of which are due to report next week, including Citigroup (C.N) and Goldman Sachs (GS.N).

Financials have been among market leaders in the recent rally, with the Standard & Poor's 500 .SPX posting its seventh straight week of gains on Friday.

While the earnings outlook is keeping alive hopes that stocks have more room to run higher, the rise in bank shares has pushed sector indexes to near resistance levels, which could signal a rest stop for the shares in the holiday-shortened week.

The market will be closed Monday in observance of Martin Luther King Jr Day.

JPMorgan Chase on Friday reported profit and revenue that were stronger than analysts had expected, and the CEO said the bank could start to increase its dividend once regulators give the go-ahead, likely at the end of March.

Analysts said the news bodes well for other financials, most of which are due to report results next week.

"Financials could very easily be one of the real darlings of this particular earnings cycle," said Burt White, managing director and chief investment officer of LPL Financial in Boston.

Financials are projected to have by far the highest growth rate in earnings for the fourth quarter, largely because of easy year-ago comparisons, according to Thomson Reuters data.

Overall, S&P 500 earnings are expected to have increased by 32 percent from a year ago, the data showed.

Besides the banks, economic bellwether General Electric (GE.N) as well as marquee tech names Apple (AAPL.O), Google (GOOG.O) and eBay (EBAY.O) are due to report.

DREAMING OF BANK DIVIDENDS

Investors have been keen for news on when bank dividends will be reinstated, and when it happens, it's going to mean more investment in financials, White said.

"Once they start (paying dividends) ... you're going to see an enormous amount of buying from yield-starved investors, as well as funds and ETFs (exchange-traded funds) that really are going to have to relook at the landscape and put financials back in there," he said.

Among other top banks reporting next week are Morgan Stanley (MS.N), Bank of America (BAC.N) and Wells Fargo & Co (WFC.N).

BP (BP.N), recovering from its Gulf of Mexico oil spill disaster, will swap 5 percent of its shares, valued at $7.8 billion, for 9.5 percent of Rosneft in an agreement that immediately raised concerns about U.S. economic security from an American lawmaker and criticism from environmentalists.

The deal covers huge areas of the South Kara Sea in the Arctic that BP said could contain billions of barrels of oil and gas and had been previously off limits to foreign companies.

The pact, which is expected to be completed in a few weeks, highlights a rebound in relations with Moscow both for BP and its Chief Executive Bob Dudley, who was forced to flee Russia in 2008 after heading BP's Russian joint venture, TNK-BP, which is half-owned by BP.

Dudley said the deal was the first significant cross-shareholding between a nationally owned oil company and an international oil company and called it "a new template for how business can be done in our industry."

Dudley had been the boss for TNK-BP's (TNBPI.RTS) formation in 2003 and was forced to leave due to what he described as a campaign of harassment by BP-TNK's billionaire oligarch co-owners.

The issue has since been resolved and Dudley returned to Moscow for the first time this summer, following his appointment as CEO of BP, to be warmly welcomed by officials.

"It has turned from a fistfight into a lovefest," said Cliff Kupchan, a director at Eurasia Group in Washington.

Russia is a key part of BP's global operation, providing the company with a quarter of its reserves before the U.S. oil spill, so it is vital for Dudley to establish a good working relationship with the world's largest oil exporting nation.

U.S. Congressman Edward Markey, who is the top Democrat on the House Natural Resources Committee, immediately called for a review of the deal by U.S. regulators to see whether it affects the national and economic security of the United States. He noted that in 2009 BP was the top petroleum supplier to the U.S. military.

The U.S. Treasury said it is forbidden by law to comment on investigations, planned or under way, by its Committee on Foreign Investment in the United States.

Environmental group Greenpeace, noting the fragility of the Arctic, also lashed out.

"Now BP has bought its way into the Arctic by the back door. It seems the company learned nothing last year in the Gulf of Mexico," Charlie Kronick of Greenpeace said in a statement.

BP has a market capitalization of $150 billion U.S. dollars, while Rosneft is valued at about $83 billion.

ARCTIC EXPLORATION

BP (BP.N), recovering from its Gulf of Mexico oil spill, said on Friday it will swap 5 percent of its shares, valued at $7.8 billion, for 9.5 percent of Rosneft.

The deal, which is expected to be completed in a few weeks, highlights a sharp turnaround in relations with Moscow both for BP and its Chief Executive Bob Dudley, who was forced to flee Russia in 2008 after heading BP's Russian joint venture, TNK-BP, which is half-owned by BP.

Dudley had been the boss for TNK-BP's (TNBPI.RTS) formation in 2003 and was forced to leave due to what he described as a campaign of harassment by BP-TNK's billionaire oligarch co-owners.

The issue has since been resolved and Dudley returned to Moscow for the first time this summer, following his appointment as CEO of BP, to be warmly welcomed by officials.

Tony Hayward, Dudley's predecessor who was vilified for his handling of BP's massive Gulf of Mexico spill in 2010, holds a seat on TNK-BP's board of directors.

Russia is a key part of BP's global operation, providing the company with a quarter of its reserves before the U.S. oil spill, so it is vital for Dudley to establish a good working relationship with the world's largest oil exporting nation.

Congressman Edward Markey, who is the top Democrat on the House Natural Resources Committee, immediately called for a review of the deal by U.S. regulators.

GLOBAL STAGE

Russia has increasingly been looking to raise its influence on the global financial stage, with major companies -- including state-controlled ones -- seeking foreign acquisitions.

Some deals have come under fierce opposition in the countries involved, such as Surgutneftegas's (SNGS.MM) purchase of a stake in Hungary's MOL (MOLB.BU). Others, like Sberbank's (SBER03.MM) bid for German carmaker Opel, collapsed.

Prime Minister Vladimir Putin's government has also pledged to ease investors' access into Russia as it looks to foreigners to play a key role in helping to modernize the economy -- including through taking part in a big privatization drive starting this year.

Britain's new coalition government has attempted to improve relations with Moscow -- tense since the murder of ex-KGB agent Alexander Litvinenko in 2006 -- although tensions resurfaced last month with the expulsion of a Russian diplomat from London.

U.S.-listed shares of BP, which had been trading higher, fell slightly to $48.87 in post-market trading. The stock had closed at $49.25 on the New York Stock Exchange.

(Additional reporting by Volodya Soldatkin, Toni Vorobyova and Darya Korsunskaya in Moscow and Kristen Hays and Chris Baltimore in Houston, writing by Anna Driver, editing by Gerald E. McCormick, Gary Hill)

Bankers were buzzing on Friday about how soon that might happen, with at least one saying he would not be surprised if the government picked the deal's managers next week and others saying the fee on the deal was already under pressure.

AIG Chief Executive Bob Benmosche, in an interview on Friday, said the company was hoping to pick the deal's managers as soon as was practical, though he gave no timeframe.

He also said work would begin immediately on preparing the investor roadshows to sell institutions on the restructured company. Benmosche plans to take part despite aggressive chemotherapy for cancer.

"I'm still feeling pretty good," he said.

The recapitalization was intended to simplify AIG's $182 billion bailout by paying off the Federal Reserve and leaving the U.S. Treasury as AIG's majority owner. The Treasury said on Friday its cash investment in AIG is now $68 billion.

"Treasury remains optimistic that taxpayers will get back every dollar of their investment in AIG," Treasury Secretary Timothy Geithner said in a statement. The government stands to make a profit in the tens of billions of dollars on its AIG shares, given their appreciation over the last year.

SALE IN MAY

A person familiar with the situation told Reuters on Monday a large Treasury-AIG share sale was likely after mid-May, and other sources have said in the past that Treasury likely would dispose of the stake by 2012.

The Treasury spent all day Thursday meeting bankers in New York to find the right group to manage the stock sales. The CEOs of some of the world's largest financial institutions appeared in person to make their case for what could be one of the 10 largest share offers ever.

Sources have said the banks' proposals would includes fees of no more than 75 basis points -- some $150 million for the winning banks on a $20 billion deal, but half the typical fee for a deal of this type and size.

Some bankers said on Friday they would not be surprised, given the competitive nature of the deal, if the fees went even lower -- although one banker pointedly noted he had no interest in doing the deal for free.

BUYING A MISSILE

The fee structure would be broadly in line with what the government paid banks last year to manage the initial public offering of automaker General Motors Co. Multiple people familiar with the situation said it did not make sense for the AIG fees to be higher than for GM.

"It's like buying a missile at $1 billion when the last time you paid half a billion," one person said.